What is the NPV of the book deal with the royally payments? (why there is no irr that makes npv equal to zero when there are royalties ?I c. Determine if the book deal with royalties has an IRR between 0% and 10%. Write down the equation you need to solve to nd any IRRs and use Excel to calculate. d. Can you use the IRR found to decide if the book deal with royalties is attractive? 2) You are evaluating the following two mutually exclusive projects: a. Which project should be undertaken if the cost of capital is 5% per year? NPV 1=-50+25(1.05)=30/(1.05)"2 NPV 2= -30+0=+35/(1.05)"2 b. What if instead the cost of capital is 7% per year? same formula NPV 1= NPV2= c. Compute the IRR of project Y. To compute IRR , NPV=0 NPV: = -30+35/(1+irr)"2 (1. Plot a graph for both projects with the NPV on the yaxis and the discount rate on the xaxis. e. What does it mean if a project would have an IRR of say 10%? Project Cash Flow Today Cash Flow in One Year Cash Flow in Two Years X -$50 $25 $30 Y -$30 $0 $35 2 Suppose an additional project 2 comes up. 2 -$50 $40 $15 Also suppose that now the projects are no longer mutually exclusive (i.e. you can undertake more than one project) but you have only $100 available today to spend on projects. f. Which project(s) should be undertaken if your cost of capital is 5% per year? Use both the NPV and the Protability Index to answer. g. Does the Protability Index always lead to highest NPV? Chapter 8: Capital Budgeting 3) ABC Inc. is deciding whether to expand its production facilities. Management has projected the below mentioned nancial information for the rst two years (in millions of dollars) where all items occur at the end of the year. Assume no other cash flows occur for this